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U.S. Wins Predatory Lending Lawsuit Against Corinthian

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A federal judge this week ruled that Corinthian Colleges engaged in “unfair” and “deceptive” practices in its private student lending program and ordered the company to pay more than $500 million in restitution to students.

Judge Gary Feinerman of the U.S. District Court for the Northern District of Illinois on Tuesday ruled that Corinthian deceived students by convincing them to take out private student loans based on misleading and false information about their job prospects upon completing the for-profit college’s programs. He also found that the company illegally collected private student loan debt.

Because the company is now defunct, former Corinthian students will likely not see any of the $531 million in restitution that the judge ordered the college pay to students who took out private loans on its campuses.

However, the legal finding against Corinthian may help boost the case of former students who are asking the U.S. Department of Education to cancel their loans.

Education Department officials have struggled to decide what type of evidence they need to grant such debt relief. But officials said earlier this year that actual legal findings against Corinthian -- as opposed to allegations made in lawsuits -- were the best type of evidence that could help a borrower make a case.

CFPB Director Richard Cordray said in a statement that the judge’s “ruling marks the end of our litigation against a company that severely harmed tens of thousands of students, turning dreams of higher education into a nightmare.”

He said that bureau officials, who also have a pending lawsuit against ITT Tech, remain “deeply concerned about risks facing student borrowers in the for-profit space and will continue to be vigilant in rooting out harmful practices.”